COVID-19

Accounting implications of the

effects of COVID-19

25 March 2020
Joining us today

Mohamed Elborno Sandra Thompson Gary Berchowitz Helen Wise Gavin Steel Yelena Belokovylenko
Partner Partner Partner Partner Partner Director
ME Assurance Leader PwC Global Accounting PwC Global Accounting ME Accounting Consulting ME Accounting Advisory ME Accounting Consulting
Consulting Services - Consulting Services - Services Leader Leader Services
Financial Instruments Non-Financial
Leader Instruments Leader

Accounting implications of the effects of COVID-19 25 March 2020

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Our focus for today

1 2 3 4
Considerations Key considerations Key considerations Key areas to protect
for 31 December for non financial for financial your business
2019 year end instruments instruments and during uncertainty
reporting leases

Accounting implications of the effects of COVID-19 25 March 2020

PwC
Considerations for 31 December 2019 year end reporting

Post balance sheet Going concern Middle East

events assessments specific impacts:

● Events existing at balance sheet ● Exception to post balance sheet ● Finalisation of 31

date
● Non adjusting event - no impact on
measurement
● Disclosures:
○ Explanation on events
○ Quantitative impact
○ Qualitative impact
events requirement
● Consider post balance sheet
events on going concern
assessment
● Impacts on:
○ Liquidity
○ Cash flow assessments
○ Revised budgets and business
plans
December 2019 year ends
in progress
● Consider broader impact -
direct and indirect
● Disclosures of impacts
need to be provided -
quantitative and qualitative
● Going concern including
changing oil price

● Disclosures
Continuously assess going concern - each reporting
period until signing the financial statements
Accounting implications of the effects of COVID-19 25 March 2020
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Key considerations for non financial instruments

Impairment of non Government

financial assets Revenue grants

● Non current assets (excluding ● Variable consideration ● Government stimulus packages

financial assets ● Probable that revenue will be ● Revenue grants - fees and
● Inventory valuations received commissions
● Investment in associates / JVs ● Low / zero interest loans
● Property, plant and equipment ● Lessor incentive plans

Accounting implications of the effects of COVID-19

PwC
Key considerations for non financial instruments

Non financial Disclosures and

obligations interim reporting

● Restructuring provisions ● Significant estimates and

● Provisions for future operating costs judgements
● Onerous contracts ● Consider additional disclosures
● Contingent assets - virtually certain to inform users
● Employee benefit plans ● Interim impact of virus
● Income taxes
● Debt covenants

Accounting implications of the effects of COVID-19

PwC
Key considerations for non financial instruments

Middle East
specific impacts:

● Reliance on oil, hospitality,

travel, retail and real estate -
Indicators of impairment
● Assumptions used in
impairment testing given the
uncertainty and volatility
● Fair value - investment
property
● Government grants - stimulus
provided by governments
● Restructuring provisions
● Q1 reporting impacts
● Debt covenant breaches

Accounting implications of the effects of COVID-19 25 March 2020

PwC
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Key considerations for financial instruments

Changes to payment
terms on financial Government
Measuring ECL
instruments programmes
● Reasonable and supportable ● Impairment [lenders] ● Guarantees, lending to
information ● Modification versus banks / others
● Changes in payment terms extinguishment ● Is there a government grant?
● Significant increase in credit risk ● Accounting for modifications ● If there is a grant what is the
[staging] [lenders versus borrower] accounting?
● Forward looking information /
macro factors
● Government assistance
New loans

● Impact of new terms on SPPI

● Credit impaired
● Government grants

Accounting implications of the effects of COVID-19

PwC
Key considerations for financial instruments

Banking regulations IFRS 7 Disclosures Leases

and IFRS 9
● Regulatory capital reliefs ● Explaining financial risks and ● Rent free periods
● IFRS 9 impact how this is managed ● Payment to lessees
● Liquidity risks
● Impacts on ECL
● Disclosures on assumptions,
Fair value inputs and sensitivity
● Interim reporting
● Fair value hierarchy -
volatility
● Inputs in level 3 due to
volatility
● Ignoring market prices
● Disclosures on FV

Accounting implications of the effects of COVID-19

PwC
Key considerations for financial instruments and leases

Middle East
specific impacts:

● Payment holidays, loan renegotiations

- banks and borrowers
● Government initiatives: funding
holidays, providing zero cost loans to
banks to pass on, paying finance costs
on loans
● Forward looking macro factors - oil
prices - impact on ECL
● Banking regulators asking about IFRS
9 impacts. Working together
● No increases in fees and commissions
● Rent free periods, payments to lesses

Accounting implications of the effects of COVID-19 25 March 2020

PwC
10
Key areas to protect your business during uncertainty

Organisations are facing

People Customers Operations and
potentially significant challenges Supply Chain
to which they need to respond
rapidly. Protect their wellbeing Stay close. Understand the Identify and manage supply
and welfare, especially impact of customers and chain risks and challenges
Global organisations are those living in affected implications on your revenue while ensuring resilience in
preparing and responding to the
territories. and margins. key functions and
crisis by leveraging off the
experiences of other companies, infrastructure.
governments, regulators, NGOs Legal and
and international organisations Finance
around the world that have dealt Regulation
with some of the more recent
Clear transparent financial Awareness and compliance
high profile outbreaks (including
Ebola, MERS, SARS and bird reporting to help decisions on of announcements in certain
flu). P&l, Balance sheet and, in sectors that may alter your
particular, cashflow. business and comply with
Some key focus areas….. reporting requirements.
Ensure sufficient liquidity by
managing and controlling
accounts receivables, payables
Accounting implications of the effects of COVID-19
and inventory. 25 March 2020
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11
Q&A
Contact us

Mohamed Elborno Sandra Thompson
Partner, ME Assurance Partner
Leader PwC Global Accounting
Consulting Services -
PwC Middle East Financial Instrument Leader
mohamed.elborno@pwc.com
sandra.j.thompson@pwc.com
Gary Berchowitz Helen Wise Gavin Steel Yelena Belokovylenko
Partner Partner, ME Accounting ME Accounting Advisory Director, ME Accounting
PwC Global Accounting Consulting Services Leader Leader Consulting Services
Consulting Services -
Non-Financial Instrument PwC Middle East
Leader h.wise@pwc.com PwC Middle East PwC Middle East
g.steel@pwc.com yelena.belokovylenko@pwc.com
gary.x.berchowitz@pwc.com

Accounting implications of the effects of COVID-19 25 March 2020

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